Insurance pt. 4

Teachers and not-for-profit organizations

A 403(b)plan, commonly referred to as a TSA, is available to be used by

The amount of the distribution is reduced by the amount of a 20% withholding tax

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?

The purpose of the group was to purchase life insurance

A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why?

Costs of training a replacement

A key person insurance can pay for which of the following?

Costs of training a replacement

A key person insurance policy can pay for which of the following?

Survivor protection

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor protection

A producer is helping a married couple determine the financial needs of their children in the event one or both should dies prematurely. This is a personal use of life insurance known as

Certain groups of employees only

A tax-sheltered annuity is a special tax-favored retirement plan available to

At distribution, all amounts received by the employee are tax free

All of the following are TRUE of federal tax advantages of a qualified plan EXCEPT

Premiums are determined by the age, sex and occupation of each individual certificate holder

All of the following are characteristics of group life insurance EXCEPT

The plan must provide an offset for social security benefits

All of the following are general requirements of a qualified plan EXCEPT

Being age 65

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT

The plan is funded by permanent insurance only

All of the following are true of key person insurance EXCEPT

Members cannot be excluded from coverage on the basis of insurability

All of the following are true regarding the issuance of group life insurance to labor unions EXCEPT

The CEO of a private corporation

All of the following employees may use 403(b) plan for their retirement EXCEPT

The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor

All of the following statements are TRUE concerning Debtor Groups EXCEPT

The policy is owned by the company

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

MEWAs are groups of at least 3 employers

All of the following statements describe a MEWA except

Simplified Employee Pension plan

An IRA purchased by a smaller employer to cover employees is known as a

Has at least 50 members

An association could buy group insurance for its members if it meets all of the following requirements EXCEPT

The insured may choose to convert to term or permanent individual coverage

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?

$10,000, no tax consequence

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?

Attained age

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

Profit sharing plan

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

A portion of the benefit up to a limit is tax free; the rest is taxable income

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?

$3,000

An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At the policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?

He will have to pay a penalty if he is younger than 59 1/2

An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?

Are subject to vesting requirements

Employer contributions made to a qualified plan

100% participation of members is required in noncontributory plans

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?

They are not included as income for the employee, but are taxable upon distribution

How are contributions to a tax-sheltered annuity treated with regards to taxation?

$3,000

If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?

A qualified plan for a small business

If a company has a Simplified Employee Pension plan, what type of plan is it?

Settlement option

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a

It is only taxable if the cash value exceeds the amount paid for premiums

If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?

Fully insured

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is

From trustee to trustee

In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?

The owner

In a life settlement contract, whom does the life settlement broker represent?

Grow tax deferred

In life insurance policies, cash value increases

5

In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?

Blackout period

In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 called?

Executive is the owner, and the executive pays the premium

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Generally not taxed as income

Life insurance death proceeds are

Any form of life insurance

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

At least 1,000 employees

SIMPLE plans require all of the following EXCEPT

Tax-deductible contributions

The advantage of qualified plans to employers is

A nonqualified annuity plan.

The president of a manufacturing company has offered on of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is

6 credits

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?

Owner's income

Traditional IRA contributions are tax deductible based on which of the following?

They are tax deferred until withdrawn

Under SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?

Vision, Inc.

Vision, Inc. employs 500 people. The company offers group life insurance to its employees after 90 days of service. Who is considered the policyholder of the life insurance policies Vision, Inc. offers?

Cash value can be borrowed at any time

What does "liquidity" refer to in a life insurance policy?

5 months

What is the elimination period for Social Security disability benefits?

It determines if the insurance policy is a MEC

What is the main purpose of the Seven-pay test?

Old age survivor disability insurance

What is the official name for the Social Security program?

To lessen the risk of financial loss because of death of a key employee

What is the purpose of key person insurance?

100%

What percentage of a company's employees must take part in a noncontributory group life plan?

Interest only

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

Executive bonus

When an employer offers to give an employee a wage increase in the amount of the premium of a new life insurance policy, this is called a(n)

$11,000

When the owner of a $250,000 life insurance policy died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected the Interest Settlement Option. If at the time of withdrawal the interest paid was $11,000, the beneficiary would be required to pay income tax on

The earnings in a qualified plan accumulate tax deferred

Which of the following best describes the tax advantage of a qualified retirement plan?

Those who have been insured under the plan for at least 5 years

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Third-party ownership

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?

The employees receive individual policies

Which of the following is INCORRECT concerning a noncontributory group plan?

Workers compensation

Which of the following is NOT an example of a business use of Life Insurance?

The seller must be terminally ill

Which of the following is NOT true of life settlements?

It needs IRS approval

Which of the following is NOT true regarding a nonqualified retirement plan?

Money borrowed from the cash value is taxable

Which of the following is NOT true regarding policy loans?

Premiums are not tax deductible as a business expense

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

To create an estate

Which of the following is the best reason to purchase life insurance rather than annuities?

75%

Which of the following is the required number of participants in a contributory group plan?

They allow several small employers purchase less expensive insurance together

Which of the following is true regarding METs?

Dividends are not taxable

Which of the following is true regarding taxation of dividends in participating policies?

PIA (Primary Insurance Amount)

Which of the following refers to the amount of retirement benefits a worker receives under Social Security based on the worker's earnings and retirement age?

SEPs are suitable for large companies

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?

Buy-sell agreements are normally funded with a life insurance policy

Which of the following statements concerning buy-sell agreements is true?

Lump-sum death benefits are not taxable

Which of the following statements is TRUE concerning whole life insurance?

Withdrawals are not taxable

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

Dividend

Which of the following terms is used to name the nontaxed return of unused premiums?

Life expectancy

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?

Split-dollar plan

Which of the following would be considered a nonqualified retirement plan?

A joining together by employers to provide health benefits for employee

Which statement best defines a Multiple Employer Welfare Arrangement (MEWA)?

Roth IRA

Which type of retirement account does not require the owner to start taking distributions at age 72?

A policyowner who is not the insured

Who is a third-party owner?

The employer is the owner and beneficiary

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?

Self-employed plumber

Who may contribute to a Keogh (HR-10) plan?